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GBP to EUR Exchange Rate Briefly Advances on UK Industrial Trends Report

December 18, 2017 - Written by Minesh Chaudhari

Monday’s UK factory data helped the British Pound to Euro exchange rate to avoid a drop, but the pair’s gains were limited due to appeal in Euro trade as well as persistent Brexit concerns weighing on the Pound’s strength.

Last week saw volatility in GBP/EUR, as the pair hit a high of 1.1410 and a low of 1.1297 before closing the week at around 1.1337. The pair briefly edged higher on Monday but generally trended closely to the week’s opening levels.

GBP Supported by CBI’s UK Industrial Trends Report


Monday’s UK data was not hugely influential but still supported Pound trade slightly on Monday, helping the British currency to hold its ground against an appealing Euro.

CBI’s industrial trends orders report was forecast to slip from 17 to 14 in December, but the figure instead came in at 17 again, continuing the recent trend of better than expected UK data.

The report indicated that UK factories had matched a three decade high in orders during the month of December.

While the weak Pound has caused UK inflation to surge, this report indicated that it has also made UK exports as well as domestic resources more appealing.

Samuel Tombs, economist from Pantheon Macroeconomics, speculated that the survey suggested many UK factories were running at full capacity, and noted there were downside risks in the future;

‘The risk, then, is that the UK economy fails to capitalize fully on the recovery in global trade and remains the Group of Seven’s laggard next year,’

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While the trade data boosted Sterling slightly though, the British currency was still weighed by the latest Brexit news.

Uncertainty about the kind of UK-EU trade deal the UK government will fight for, as well as the timing of future negotiations, have concerned Pound investors. UK-EU trade talks are not expected to formally begin until March 2018.

EUR Sturdy Despite Unsurprising Inflation Data


The Euro remains appealing to investors this week, despite the Eurozone’s latest Consumer Price Index (CPI) results indicating that inflation probably would remain subdued in 2018 as the European Central Bank (ECB) has predicted.

November’s Eurozone inflation rate was predicted to remain at 0.1% month on month, and the figure did indeed come in at 0.1%. The yearly figure rose from 1.4% to 1.5% as forecast while the yearly core print remained at 0.9% as expected.

The European Central Bank has taken a cautious outlook on Eurozone inflation in recent months. In its meeting last week, the ECB predicted that inflation would remain below the bank’s 2.0% target until 2020 at the earliest.

Despite the latest Eurozone inflation stats continuing to meet rather than exceed expectations, the Euro remains relatively appealing due to the Eurozone’s optimistic economic outlook and weakness in major currency rivals like the US Dollar (USD).

Analysts and investors are speculating that the Euro will continue to see strong performance in 2018, due to expectations for continued solid growth in the Eurozone bloc.

GBP/EUR Forecast: Eurozone Confidence Data Ahead


If there are no fresh developments in Brexit negotiations over the next few days, the Pound to Euro exchange rate is likely to be influenced slightly by Eurozone confidence stats instead.

Tuesday will see the publication of Ifo’s German business confidence survey for December, followed on Thursday by Eurozone consumer confidence projections, and lastly German consumer confidence data on Friday.

If the results beat expectations, this could keep the Euro afloat and help to keep pressure on GBP/EUR.

However, the Pound could be boosted if investors are impressed by any fresh Brexit news. For example, if the UK government takes a ‘soft Brexit’ stance towards UK-EU trade negotiations the Pound is likely to see stronger demand.

On the other hand though, if negotiators show signs that UK-EU trade talks may be difficult or could see further delays, this would cause Sterling weakness. Any signs that the UK government is more likely to lean towards a hard Brexit would also made the Pound unappealing.

UK public sector net borrowing data due Thursday, as well, as key UK growth results on Friday, could also influence Pound to Euro exchange rate movement.
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